Question
5. Jack Hammer invests in a stock that will pay dividends of $3.07 at the end of the first year; $3.44 at the end of
5.
Jack Hammer invests in a stock that will pay dividends of $3.07 at the end of the first year; $3.44 at the end of the second year; and $3.81 at the end of the third year. Also, he believes that at the end of the third year he will be able to sell the stock for $57.
Dividend | Present Value |
$3.07 |
|
3.44 |
|
3.81 |
|
57.00 |
|
Total |
|
What is the present value of all future benefits if a discount rate of 14 percent is applied? Use Appendix B for an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
6.
Mr. Dow bought 100 shares of stock at $28 per share. Three years later, he sold the stock for $34 per share.
What is his annual rate of return? Use Appendix B for an approximate answer, but calculate your final answer using the financial calculator method. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Annual Rate of Return = __________ %
Your uncle borrows $68,000 from the bank at 10 percent interest over the eight-year life of the loan. Use Appendix D for an approximate answer but calculate your final answer using the formula and financial calculator methods.
7.
a.What equal annual payments must be made to discharge the loan, plus pay the bank its required rate of interest? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Annual Payment = __________________
b. How much of his first payment will be applied to interest? To principal? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
| First Payment |
Interest |
|
Principle |
|
c. How much of his second payment will be applied to each? (Do not round intermediate calculations. Round your final answers to 2 decimal places.)
| Second Payment |
Interest |
|
Principle |
|
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